(All monetary figures are expressed in Canadian Dollars unless otherwise stated)
Dundee Precious Metals Inc. ("DPM" or the "Company")
(TSX:DPM)(TSX:DPM.WT)(TSX:DPM.WT.A) today announced its unaudited results for
the third quarter ended September 30, 2009. DPM reported third quarter net
earnings of $4.1 million (basic and diluted net earnings per share of $0.04).
This compares with third quarter 2008 net earnings of $6.5 million (basic and
diluted net earnings per share of $0.11).
"I am very pleased to report our third quarter 2009 results, noted Jonathan
Goodman, President and CEO of DPM. At Chelopech, we continue to experience
steady and consistent operating performance - contributing to solid financial
gains. The Chelopech mine and mill expansion plans are now finalized and
construction has begun with completion expected in the second quarter of 2011.
Operational and productivity improvements at Deno Gold translated into positive
gross profit from mining operations - a recent first for this facility."
The following table summarizes the Company's financial and operating results for
the periods indicated:
----------------------------------------------------------------------------
$ millions, except per share amounts
Ended September 30, Three Months Nine Months
----------------- -----------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Net Revenue $ 50.3 $ 16.7 $ 110.0 $ 89.2
Cost of Sales 31.5 23.8 78.1 74.5
------------------------------------------------ -------- -------- --------
Gross Profit (Loss) from Mining
Operations 18.8 (7.1) 31.9 14.7
------------------------------------------------ -------- -------- --------
Investment and Other Income (Expense) (3.7) 27.9 (3.5) 28.9
Net Earnings 4.1 6.5 1.3 0.8
Basic Net Earnings Per Share $ 0.04 $ 0.11 $ 0.01 $ 0.01
Diluted Net Earnings Per Share $ 0.04 $ 0.11 $ 0.01 $ 0.01
Net Cash Provided By (Used in) Operating
Activities 11.7 (10.4) (3.3) 3.9
Capital Expenditures (9.8) (19.3) (25.9) (66.7)
Proceeds on Sale (Purchase) of Short-term
Investments (15.1) - 14.0 -
Proceeds on Sale of Exploration Property - - 7.0 -
Other Investing Activities (1.8) 41.0 (4.2) 61.0
Financing Activities (1.0) 15.2 (3.6) 13.3
------------------------------------------------ -------- -------- --------
Net Increase (Decrease) in Cash $ (16.0) $ 26.5 $ (16.0) $ 11.5
------------------------------------------------ -------- -------- --------
Concentrate Produced (mt)
Chelopech 20,816 13,567 56,023 39,738
Deno Gold 2,972 4,608 6,145 9,197
Cash Cost per tonne Ore Processed
(US$/t)(1)
Chelopech (excluding royalties) $ 59.31 $ 60.69 $ 51.98 $ 60.39
Deno Gold $ 78.31 $ 110.75 $ 72.43 $ 109.62
------------------------------------------------ -------- -------- --------
Third Quarter 2009 - Financial Highlights
Net earnings in the third quarter of 2009 were $4.1 million compared to
net earnings of $6.5 million in the corresponding prior year period. The
decrease in net earnings, period over period, was primarily due to lower
investment and other income partially offset by higher gross profit from
mining operations and reductions in exploration and administrative
expenses. The increase in gross profit from mining operations, period
over period, was primarily due to higher deliveries of concentrates
produced at Chelopech and Deno Gold, lower production costs at Deno Gold
and Chelopech, and a 10% increase in gold price. These positive
variances were partially offset by a 24% decrease in copper price in the
third quarter of 2009 relative to the corresponding prior year period.
Included in the third quarter of 2008 results was a gain of $27.2
million on the sale of the Company's holdings in Eldorado Gold
Corporation.
Chelopech recorded a gross profit from mining operations of $17.5
million in the third quarter of 2009 compared to a gross loss from
mining operations of $1.5 million in the third quarter of 2008.
Chelopech operations reported net revenue of $41.9 million on
corresponding concentrate deliveries of 23,493 tonnes. Chelopech cash
cost per tonne of ore processed(1), excluding royalties, in the period
was 2% lower than the corresponding prior year period due to the
favourable impact of a 5% devaluation of the average Euro to U.S.
foreign exchange rate, lower input cost for backfill as the slurry
needed for the backfill in the period was produced on site whereas, in
the third quarter of 2008, it was purchased from a third party and
reduced spending on services as a result of cost savings initiatives.
These positive variances were partially offset by higher maintenance
costs resulting from planned maintenance on mobile equipment and the
planned maintenance shutdown at the mill and higher employment expenses.
Cash cost per tonne of ore processed(1), including royalties, in the
third quarter of 2009 of US$62.41 was 3% lower than the third quarter of
2008 cash cost per tonne of ore processed(1), including royalties, of
US$64.52.
Deno Gold recorded a gross profit from mining operations of $1.3 million
in the third quarter of 2009 compared to a gross loss from mining
operations of $5.6 million in the corresponding prior year period.
Continued operating improvements at Deno Gold during the quarter,
including reductions in headcount and external contractors and tighter
inventory and cost controls, and a 23% devaluation of the Armenian dram
to U.S. dollar exchange rate contributed to a 29%, period over period,
reduction in cash cost per tonne of ore processed(1), to US$78.31.
Deliveries of concentrate in the period of 4,510 tonnes were 153% higher
than the corresponding prior year period due to a drawdown of
concentrate inventory. It is currently anticipated that the positive
performance will continue into the future given improved operating
processes and controls, particularly in the areas of mine dilution and
productivity.
Net cash provided by operating activities was $11.7 million in the third
quarter of 2009 compared to cash used in operating activities of $10.4
million in the corresponding prior year period. The increase in cash
provided by operating activities was primarily due to higher gross
profit from mining operations.
As at September 30, 2009, DPM had cash, cash equivalents and short-term
investments of $74.0 million compared to $104.0 million at December 31,
2008.
Significant Items
A comprehensive review of the mine and mill expansion plans at Chelopech
resulted in certain scope changes being made to optimize the planned
investment. Such changes include the installation of an underground
crushing and conveying system in lieu of a shaft upgrade to facilitate
the increase in mine output to two million tonnes of ore per year. The
scope changes increased total expansion capital by US$42.5 million and
decreased projected unit operating cost by US$6 per tonne (US$12.0
million per year). The estimated capital cost to complete the mine and
mill expansion project, including the installation of an underground
crushing and conveying system but excluding capital spending required to
complete the metals processing facility ("MPF"), special projects
associated with on-going operations and sustaining capital, is US$102.0
million. This amount includes approximately US$19.0 million that is
forecast to be spent in the year 2009. Completion of the mine and mill
expansion is planned for the second quarter of 2011. Following
commissioning, unit operating cost for the expanded facility is expected
to decrease to approximately US$34 per tonne of ore processed.
In September 2009, the Bulgarian Ministry of Environment and Waters
("MoEW") issued the Integrated Pollution Prevention and Control ("IPPC")
permit for the MPF to be constructed in Chelopech, Bulgaria. The IPPC
and the Seveso (working with hazardous substances) permits are
prerequisites for the issuance of the MPF construction permit. The
application for the Seveso permit has been made. The MPF incorporates
pressure oxidation, solvent extraction and electrowinning and carbon in
leach cyanidation to treat the Chelopech copper/gold concentrates and
produce copper cathode and gold dore.
Following DPM's announcement on July 31, 2009 regarding the subscription
of shares of Weatherly International plc ("WTI"), the Company purchased
40.5 million ordinary shares of WTI for US$2.0 million ($2.2 million)
representing approximately 9.1% of WTI issued and outstanding shares. If
required by WTI on or before July 31, 2010, the Company will subscribe
for up to an additional US$5.0 million worth of WTI ordinary shares
based on the then prevailing market price but in no event, except in
certain circumstances, less than GBP0.03 per share. The Company also
completed an agreement with WTI's subsidiary, Namibia Custom Smelters
(Pty) Limited ("NCS"), to extend the Chelopech concentrate purchase and
sales contract to and including the year 2020.
In September 2009, the MoEW issued a Commercial Discovery Certificate
(the "Certificate") for the Krumovgrad gold deposit to DPM's Bulgarian
subsidiary, Balkan Mineral and Mining EAD. The Certificate is the final
requirement for conversion of the property to a mining concession, the
application for which has already been filed with the Bulgarian
government.
The Company continues to evaluate value enhancing strategic
opportunities available to it in respect of its Serbian assets. As part
of a limited program undertaken during the third quarter of 2009 to
delineate several key anomalies, drilling on the western margin of the
Timok Magmatic Complex in Serbia has confirmed two gold discoveries with
bulk tonnage potential.
A complete set of DPM's Consolidated Financial Statements, Notes to the
Consolidated Financial Statements and Management's Discussion and Analysis for
the third quarter ended September 30, 2009 will be posted on the Company's
website at www.dundeeprecious.com and will be filed on Sedar at www.sedar.com.
Conference Call
DPM will be holding an analyst call to present its Third Quarter 2009 Financial
Results on Thursday, November 5, 2009 at 8.30 a.m. (EST).
The call will be webcast live (audio only) at:
http://events.digitalmedia.telus.com/dundee/110509/index.php.
The audio webcast for this conference call will be archived and available on the
Company's website at www.dundeeprecious.com.
Overview
DPM is a Canadian-based, international mining company engaged in the
acquisition, exploration, development and mining of precious metal properties.
Its common shares and share purchase warrants (symbols: DPM; DPM.WT; DPM.WT.A)
are traded on the Toronto Stock Exchange ("TSX"). DPM's business objectives are
to identify, acquire, finance, develop and operate low-cost, long-life mining
properties.
The Company's operating interests include its 100% ownership of Chelopech Mining
EAD ("Chelopech"), a gold, copper, silver concentrates producer, owner of the
Chelopech mine located approximately 70 kilometres east of Sofia, Bulgaria, and
a 95% interest in Vatrin Investment Limited ("Vatrin"), a private entity which
holds 100% of Deno Gold Mining Company CJSC ("Deno Gold"), its principal asset
being the Kapan mine, a gold, copper, zinc, silver concentrates producer located
about 320 kilometres south east of the capital city of Yerevan in Southern
Armenia. DPM's interests also include a 100% interest in the Krumovgrad
development stage gold property located in south eastern Bulgaria, near the town
of Krumovgrad, and numerous exploration properties in one of the larger
gold-copper-silver mining regions in Serbia.
Summarized Financial Results
Net revenue
Net revenue from the sale of concentrates of $50.3 million in the third quarter
of 2009 was $33.6 million higher than the corresponding prior year period net
revenue due to a significant increase in deliveries of concentrates produced at
Chelopech and Deno Gold, net favourable mark-to-market adjustments, a 10%
increase in gold price and the favourable impact of a weaker Canadian to U.S.
dollar exchange rate partially offset by a 24% decrease in copper price. The
weakening of the Canadian dollar relative to the U.S. dollar, period over
period, increased revenue by $3.9 million in the period.
Deliveries of concentrates produced at Chelopech of 23,493 tonnes in the third
quarter of 2009 were 126% higher than third quarter of 2008 deliveries of 10,376
tonnes. Deliveries of concentrates produced at Deno Gold of 4,510 tonnes in the
third quarter of 2009 were 153% higher than third quarter of 2008 deliveries of
1,785 tonnes. Net favourable mark-to-market adjustments and final settlements of
$1.5 million, related to the open positions of provisionally priced concentrate
sales, were recorded in the third quarter of 2009 compared to net unfavourable
mark-to-market adjustments and final settlements of $4.4 million in the third
quarter of 2008. In the third quarter of 2009, DPM recorded realized losses on
its copper derivatives of $0.4 million and unrealized gains of $0.03 million.
The copper derivative contracts were entered into to mitigate substantially all
the copper price exposure and associated earnings volatility the Company is
exposed to as a result of the time lag between the receipt of provisional sales
revenue of concentrate deliveries and its specified final pricing period.
Net revenue from the sale of concentrates of $110.0 million in the first nine
months of 2009 was $20.8 million or 23% higher than the corresponding prior year
period due primarily to a 34% increase in deliveries, net favourable
mark-to-market adjustments, the favourable impact of a weaker Canadian to U.S.
dollar exchange rate and a 4% increase in gold price partially offset by a 42%
decrease in copper price. The weakening of the Canadian dollar relative to the
U.S. dollar, period over period, increased revenue by $13.6 million in 2009.
Deliveries of concentrates produced at Chelopech of 57,751 tonnes in the first
nine months of 2009 were 42% higher than the corresponding prior year period
deliveries of 40,796 tonnes due to increased production in 2009. Deliveries of
concentrates produced at Deno Gold of 5,415 tonnes in the first nine months of
2009 were 13% lower than the corresponding prior year period deliveries of 6,249
tonnes. Deno Gold was on care and maintenance in the first quarter of 2009. Net
favourable mark-to-market adjustments and final settlements of $7.4 million,
related to the open positions of provisionally priced concentrate sales, were
recorded in the first nine months of 2009 compared to net unfavourable
mark-to-market adjustments and final settlements of $3.1 million recorded in the
corresponding prior year period. In the first nine months of 2009, DPM recorded
realized losses on its copper derivatives of $4.5 million and unrealized gains
of $0.03 million.
The average London Bullion gold price(2) in the third quarter of 2009 of US$960
per ounce was 10% higher than the third quarter of 2008 average price of US$869
per ounce. The average London Metal Exchange ("LME") cash copper price(2) in the
third quarter of 2009 of US$2.66 per pound was 24% lower than the third quarter
of 2008 average price of US$3.48 per pound. The average LME cash zinc price(2)
in the third quarter of 2009 of US$0.80 per pound was comparable to the third
quarter of 2008 average price of US$0.80 per pound.
The average London Bullion gold price(2) in the first nine months of 2009 of
US$930 per ounce was 4% higher than the corresponding prior year period average
price of US$898 per ounce. The average LME cash copper price(2) in the first
nine months of 2009 of US$2.11 per pound was 42% lower than the corresponding
prior year period average price of US$3.62 per pound. The average LME cash zinc
price(2) in the first nine months of 2009 of US$0.67 per pound was 30% lower
than the first nine months of 2008 average price of US$0.96 per pound.
Cost of sales
Cost of sales of $31.5 million in the third quarter of 2009 was $7.7 million or
32% higher than the corresponding prior year period due to a significant
increase in deliveries and the unfavourable impact of a weaker Canadian dollar
to U.S. dollar exchange rate partially offset by lower production costs at Deno
Gold and Chelopech. Deliveries of concentrates produced at Chelopech and Deno
Gold totalled 28,003 tonnes compared to 12,161 tonnes in the corresponding prior
year period. A weaker Canadian dollar to U.S. dollar exchange rate in the third
quarter of 2009, compared to the corresponding prior year period, increased cost
of sales by $2.7 million in the period.
Cost of sales of $78.1 million in the first nine months of 2009 was $3.6 million
or 5% higher than the corresponding prior year period due primarily to higher
deliveries of concentrates produced at Chelopech and the unfavourable impact of
a weaker Canadian to U.S. dollar exchange rate partially offset by lower
production costs at Chelopech and Deno Gold. A weaker Canadian dollar to U.S.
dollar exchange rate in the first nine months of 2009, compared to the
corresponding prior year period, increased cost of sales by $9.4 million in
2009.
Cash cost per tonne of ore processed(1), excluding royalties, at Chelopech in
the third quarter of 2009 of US$59.31 was 2% lower than the corresponding prior
year period cash cost per tonne of ore processed(1), excluding royalties, of
US$60.69 due to the favourable impact of a 5% devaluation of the average Euro to
U.S. foreign exchange rate, lower input cost for backfill as the slurry needed
for the backfill in the period was produced on site whereas, in the third
quarter of 2008, it was purchased from a third party and reduced spending on
services as a result of cost savings initiatives. These positive variances were
partially offset by higher maintenance costs resulting from planned maintenance
on mobile equipment and the planned maintenance shutdown at the mill and higher
employment expenses. Cash cost per tonne of ore processed(1), including
royalties, in the third quarter of 2009 of US$62.41 was 3% lower than third
quarter of 2008 cash cost per tonne of ore processed(1), including royalties, of
US$64.52.
Cash cost per tonne of ore processed(1), excluding royalties, at Chelopech in
the first nine months of 2009 of US$51.98 was 14% lower than the corresponding
prior year period cash cost per tonne of ore processed(1), excluding royalties,
of US$60.39 due to the favourable impact of a weaker Euro relative to the U.S.
dollar, higher volumes of material processed and reduced spending on services
partially offset by higher spending on backfill due to higher volumes of
backfill placed in stopes. Cash cost per tonne of ore processed(1), including
royalties, in the first nine months of 2009 of US$57.56 was 10% lower than first
nine months of 2008 cash cost per tonne of ore processed(1), including
royalties, of US$63.88.
Cash cost per tonne of ore processed(1) at Deno Gold in the third quarter and
first nine months of 2009 of US$78.31 and US$72.43 were, respectively, 29% and
34% lower than the corresponding prior year periods due to the favourable impact
of a weaker Armenian dram relative to the U.S. dollar, improved operating
performance, tighter inventory and cost controls and reductions in headcount and
external contractors.
Gross profit (loss)
Chelopech recorded a gross profit from mining operations of $17.5 million in the
third quarter of 2009 compared to a gross loss from mining operations of $1.5
million in the third quarter of 2008. The increase in gross profit from mining
operations, period over period, of $19.0 million was due to a 126% increase in
deliveries of concentrates, higher gold and copper contained in concentrate
produced due to higher metal grades and recovery rates, lower production costs
and a 10% increase in gold price partially offset by a 24% decrease in copper
price. Net favourable mark-to-market adjustments and final settlements of $0.6
million, related to the open positions of provisionally priced concentrate
sales, were recorded in the third quarter of 2009 compared to net unfavourable
mark-to-market adjustments and final settlements of $2.9 million in the third
quarter of 2008. Net losses of $0.4 million related to the copper derivatives
were recorded in the third quarter of 2009.
Chelopech recorded a gross profit from mining operations of $36.7 million in the
first nine months of 2009 compared to a gross profit from mining operations of
$28.1 million in the corresponding prior year period. The increase in gross
profit from mining operations, period over period, of $8.6 million was due to a
42% increase in deliveries, higher gold and copper contained in concentrate
produced due to higher metal grades and recovery rates, lower production costs
and a 4% increase in gold price partially offset by a 42% decrease in copper
price. Net favourable mark-to-market adjustments and final settlements of $6.9
million, related to the open positions of provisionally priced concentrate
sales, were recorded in the first nine months of 2009 compared to net
unfavourable mark-to-market adjustments and final settlements of $1.7 million in
the first nine months of 2008. Offsetting the net favourable mark-to-market
adjustments and final settlements recorded in the first nine months of 2009 were
net losses related to the copper derivatives of $4.5 million.
Deno Gold recorded a gross profit from mining operations of $1.3 million in the
third quarter of 2009 compared to a gross loss from mining operations of $5.6
million in the corresponding prior year period due to a 153% increase in
deliveries and lower production costs. Net favourable mark-to-market adjustments
and final settlements of $0.9 million, related to the open positions of
provisionally priced concentrate sales, were recorded in the third quarter of
2009 compared to net unfavourable mark-to-market adjustments and final
settlements of $1.5 million in the third quarter of 2008.
Deno Gold recorded a gross loss from mining operations of $4.7 million in the
first nine months of 2009 compared to a gross loss from mining operations of
$13.5 million in the first nine months of 2008. The operations were on care and
maintenance in the first quarter of 2009. Net favourable mark-to-market
adjustments and final settlements of $0.5 million, related to the open positions
of provisionally priced concentrate sales, were recorded in the first nine
months of 2009 compared to net unfavourable adjustments and final settlements of
$1.4 million in the corresponding prior year period.
Investment and other income (expense)
Investment and other expense were $3.7 million and $3.5 million in the third
quarter and first nine months of 2009, respectively, compared to investment and
other income of $27.9 million and $28.9 million in the corresponding prior year
periods. Scope changes following a comprehensive review of the Chelopech mine
and mill expansion project resulted in a write-down of fixed assets of $4.1
million (US$3.5 million) in the third quarter of 2009. Included in the third
quarter of 2008 results was a gain of $27.2 million on the sale of the Company's
holdings in Eldorado Gold Corporation.
Administrative and other expenses
Administrative and other expenses were $4.6 million and $12.6 million in the
third quarter and first nine months of 2009, respectively, compared to $5.5
million and $15.5 million in the corresponding prior year periods. The decrease
in both periods was primarily due to lower employment costs and associated
expenses and lower spending on outside services as a result of the cost savings
initiatives introduced in the first quarter of 2009 partially offset by a
provision for royalties and other taxes.
Exploration expense
Exploration expense was $1.3 million and $4.1 million in the third quarter and
first nine months of 2009 compared to $7.5 million and $21.5 million in the
corresponding prior year periods, respectively, due to a decrease in the level
of exploration activities in Serbia following the suspension of activities in
the fourth quarter of 2008.
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated
into Canadian dollars at the period end exchange rates, whereas non-monetary
assets and liabilities and related expenses denominated in foreign currencies
are translated at the exchange rate in effect at the transaction date. Income
and expense items are translated at the exchange rate in effect on the date of
the transaction. Exchange gains and losses resulting from the translation of
these amounts are included in the consolidated statement of earnings. In the
third quarter and first nine months of 2009, DPM recorded foreign exchange
losses of $1.5 million and $4.5 million, respectively, compared with foreign
exchange losses of $0.9 million and $1.6 million in the corresponding prior year
periods.
Income tax expense
DPM's effective tax rate of 27% for the third quarter of 2009 was lower than the
statutory rate of 33.0% due primarily to an increase in the benefit of profits
earned in jurisdictions having a lower tax rate.
DPM's effective tax rate of 48% for the first nine months of 2009 was higher
than the statutory rate of 33.0% due primarily to an increase in the valuation
allowance on investments and property and the unrecognized tax benefit relating
to foreign losses partially offset by the benefit of profits earned in
jurisdictions having a lower tax rate and the reversal of the flow-through
shares liability of $6.0 million, which was recognized as a recovery following
the sale of the Back River project.
Operating cash flow (shortfall)
The following table summarizes the Company's cash flow (shortfall) from
operating activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands
Ended September 30, Three Months Nine Months
------------------- -------------------
2009 2008 2009 2008
-------------------------------------------- --------- ---------- ---------
Net earnings $ 4,101 $ 6,537 $ 1,317 $ 847
Non-cash charges (credits) to
earnings:
Amortization of property, plant
and equipment 4,858 4,314 14,175 11,456
Net gains on sale of investments (207) (27,509) (160) (28,005)
Impairment of property, plant and
equipment 4,211 62 4,520 75
Write-downs of investments to
market value - 572 1,130 1,523
Other (268) 696 (2,283) 618
-------------------------------------------- --------- ---------- ---------
Total non-cash charges (credits) to
earnings 8,594 (21,865) 17,382 (14,333)
Decrease (increase) in non-cash
working capital (1,025) 4,887 (21,959) 17,368
-------------------------------------------- --------- ---------- ---------
Net cash provided by (used in)
operating activities $ 11,670 $ (10,441) $ (3,260)$ 3,882
-------------------------------------------- --------- ---------- ---------
-------------------------------------------- --------- ---------- ---------
Cash provided by operating activities in the third quarter of 2009 was $11.7
million compared with cash used in operating activities of $10.4 million in the
third quarter of 2008. The increase in cash provided by operating activities in
the third quarter of 2009, relative to the corresponding prior year period, was
primarily due to higher gross profit from mining operations.
Cash used in operating activities in the first nine months of 2009 was $3.3
million compared with cash provided by operating activities of $3.9 million in
the first nine months of 2008. The increase in cash used in operating activities
in the first nine months of 2009, relative to the corresponding prior year
period, was primarily due to an increase in working capital requirements
partially offset by higher gross profit from mining operations. The non-cash
working capital requirements of $22.0 million in the first nine months of 2009
was primarily due to a decrease in accounts payable, a decrease in deferred
revenue and an increase in accounts receivable.
The following table summarizes the Company's investing activities for the
periods indicated:
----------------------------------------------------------------------------
$ thousands
Ended September 30, Three Months Nine Months
--------------------- ---------------------
2009 2008 2009 2008
----------------------------------------- ---------- ----------- ----------
Proceeds on sale of exploration
property $ - $ - $ 7,000 $ -
Proceeds on sale of investments
at fair value 308 41,047 2,612 60,238
Proceeds on sale (purchase) of
short-term investments (15,101) - 14,036 -
Loan advances - - (4,887) -
Purchases of investments at
fair value (2,152) - (2,152) -
Capital expenditures (9,766) (19,321) (25,934) (66,681)
Proceeds on sale of property,
plant and equipment 30 5 167 714
----------------------------------------- ---------- ----------- ----------
Net cash provided by (used in)
investing activities $ (26,681)$ 21,731 $ (9,158)$ (5,729)
----------------------------------------- ---------- ----------- ----------
----------------------------------------- ---------- ----------- ----------
Capital expenditures at Chelopech in the third quarter and first nine months of
2009 of $8.6 million and $20.6 million were, respectively, 5% and 38% lower than
the corresponding prior year periods. The decrease in spending in the nine
months ended September 2009, relative to the corresponding prior year period,
was due to a reduction in non-critical expenditures, including those related to
the expansion project. Capital expenditures at Deno Gold in the third quarter
and first nine months of 2009 of $1.2 million and $5.0 million were,
respectively, 82% and 75% lower than the corresponding prior year periods due
primarily to the suspension of exploration activities in the fourth quarter of
2008.
In August 2009, DPM purchased 40.5 million ordinary shares of WTI for US$2.0
million ($2.2 million), which by agreement, was advanced by WTI to its
subsidiary, NCS, to cover the costs of certain capital improvements being made
to its Tsumeb copper smelter and for working capital purposes.
In 2009, DPM advanced $4.9 million (US$4.0 million) to NCS, a subsidiary of WTI,
as per the agreement DPM signed with NCS in December 2008 to advance up to
US$7.0 million of loans to NCS. The total commitment of US$7.0 million had been
advanced as at June 30, 2009.
Financing Activities
The following table summarizes the Company's financing activities for the
periods indicated:
----------------------------------------------------------------------------
$ thousands
Ended September 30, Three Months Nine Months
------------------- -------------------
2009 2008 2009 2008
-------------------------------------------- --------- ---------- ---------
Redemption of deferred share units $ - $ - $ - $ (58)
Repayment of leases (430) - (846) -
Proceeds of debt financing - 15,821 - 15,821
Repayment of debt (609) (595) (2,729) (2,429)
-------------------------------------------- --------- ---------- ---------
Net cash provided by (used in)
financing activities $ (1,039) $ 15,226 $ (3,575) $ 13,334
-------------------------------------------- --------- ---------- ---------
-------------------------------------------- --------- ---------- ---------
Average Metal Prices
The following table, summarizing the average metal prices for the London Bullion
Market Association ("LBM") gold, LME copper Grade A, LME special high grade
("SHG") zinc and LBM silver prices, is used to illustrate the Company's average
metal price exposures based on its key reference prices for the periods
indicated.
----------------------------------------------------------------------------
US$ Average
Ended September 30, Three Months Nine Months
--------------------- ---------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
London Bullion gold ($/oz) $ 960 $ 869 $ 930 $ 898
LME settlement copper ($/lb) 2.66 3.48 2.11 3.62
LME settlement SHG zinc ($/lb) 0.80 0.80 0.67 0.96
LBM spot silver ($/oz) $ 14.70 $ 15.03 $ 13.68 $ 16.63
----------------------------------------------------------------------------
Non-GAAP Financial Measures
We have referred to cash cost per tonne of ore processed because we understand
that certain investors use this information to assess the Company's performance
and also determine the Company's ability to generate cash flow for investing
activities. This measurement captures all of the important components of the
Company's production and related costs. In addition, management utilizes this
metric as an important management tool to monitor cost performance of the
Company's operations. This measurement has no standardized meaning under
Canadian GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies. This measurement is intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with Canadian GAAP.
The following table provides, for the periods indicated, a reconciliation of the
Company's cash cost measure and Canadian GAAP cost of sales:
-------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended September 30, 2009 Chelopech Deno Gold Total
-------------------------------------------------------------------------
Ore processed (mt) 239,803 66,466
Cost of sales (Cdn$) $ 24,015 $ 7,488 $ 31,503
Cost of sales (US$) $ 21,159 $ 6,699 $ 27,858
Add (deduct):
Amortization (3,007) (705)
Reclamation costs and other (444) (241)
Change in concentrate inventory (2,742) (548)
-------------------------------------------------- ---------- -----------
Total cash cost of production (US$) $ 14,966 $ 5,205
-------------------------------------------------- ---------- -----------
-------------------------------------------------- ---------- -----------
Cash cost per tonne of ore processed
(US$), including royalties $ 62.41 $ 78.31
Cash cost per tonne of ore processed
(US$), excluding royalties $ 59.31 $ 78.31
-------------------------------------------------- ---------- -----------
-------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended September 30, 2008 Chelopech Deno Gold Total
-------------------------------------------------------------------------
Ore processed (mt) 238,820 78,191
Cost of sales (Cdn$) $ 16,674 $ 7,155 $ 23,829
Cost of sales (US$) $ 15,853 $ 6,889 $ 22,742
Add/(Deduct):
Amortization and other (3,283) (977)
Change in concentrate inventory 2,837 2,748
-------------------------------------------------- ---------- -----------
Total cash cost of production (US$) $ 15,407 $ 8,660
-------------------------------------------------- ---------- -----------
-------------------------------------------------- ---------- -----------
Cash cost per tonne of ore processed
(US$), including royalties $ 64.52 $ 110.75
Cash cost per tonne of ore processed
(US$), excluding royalties $ 60.69 $ 110.75
-------------------------------------------------- ---------- -----------
(1) A reconciliation of the Company's cash cost per tonne ore processed to
cost of sales under Canadian GAAP for the third quarters of 2009 and
2008 is shown in the table entitled "Non-GAAP Financial Measures."
(2) Refer to the quarterly information section for the average metal prices
used to illustrate the Company's average metal price exposure based on
its key reference prices.
To view the Financial Statements, please click the following link:
http://media3.marketwire.com/docs/dpm1104.pdf
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" that involve a number
of risks and uncertainties. Forward-looking statements include, but are not
limited to, statements with respect to the future price of gold, copper, zinc
and silver the estimation of mineral reserves and resources, the realization of
mineral estimates, the timing and amount of estimated future production, costs
of production, capital expenditures, costs and timing of the development of new
deposits, success of exploration activities, permitting time lines, currency
fluctuations, requirements for additional capital, government regulation of
mining operations, environmental risks, unanticipated reclamation expenses,
title disputes or claims, limitations on insurance coverage and timing and
possible outcome of pending litigation. Often, but not always, forward-looking
statements can be identified by the use of words such as "plans", "expects", or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate", or "believes",
or variations of such words and phrases or state that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur or be
achieved.
Forward-looking statements are based on the opinions and estimates of management
as of the date such statements are made, and they involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
other future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, among others: the actual
results of current exploration activities; actual results of current reclamation
activities; conclusions of economic evaluations; changes in project parameters
as plans continue to be refined; future prices of gold, copper, zinc and silver;
possible variations in ore grade or recovery rates; failure of plant, equipment
or processes to operate as anticipated; accidents, labour disputes and other
risks of the mining industry; delays in obtaining governmental approvals or
financing or in the completion of development or construction activities,
fluctuations in metal prices, as well as those risk factors discussed or
referred to in Management's Discussion and Analysis under the heading "Risks and
Uncertainties" and other documents filed from time to time with the securities
regulatory authorities in all provinces and territories of Canada and available
at www.sedar.com. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially
from those described in forward-looking statements, there may be other factors
that cause actions, events or results not to be anticipated, estimated or
intended. There can be no assurance that forward-looking statements will prove
to be accurate, as actual results and future events could differ materially from
those anticipated in such statements. Unless required by securities laws, the
Company undertakes no obligation to update forward-looking statements if
circumstances or management's estimates or opinions should change. Accordingly,
readers are cautioned not to place undue reliance on forward-looking statements.
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